Anindita Chatterjee
Canterbury Building Company Faces Liquidation with Over $1 Million Owed to Creditors
A prominent building firm in Canterbury has entered liquidation, burdened with debts exceeding $1 million, a situation that highlights the ongoing challenges in the construction sector. Devon Construction, based in Kaiapoi, ceased trading in September 2024, following a dramatic downturn in construction activities in the region.
Background on Devon Construction
Incorporated in 2008, Devon Construction specialized in residential projects throughout Canterbury. The recent slowdown in the construction industry made it financially impossible for the company to operate. After a special resolution by the shareholders last week, Brenton Hunt of Insolvency Matters Limited was appointed as the liquidator.
Financial Overview
The financial report prepared by Hunt indicates that Devon Construction was insolvent at the time of liquidation. The company had:
- Secured creditors owed approximately $300,000.
- Unsecured creditors facing a staggering shortfall of around $800,000.
The Inland Revenue Department is also among the creditors, with an estimated $150,000 owed in GST and PAYE. At the time of liquidation, the firm’s bank account was in overdraft.
Assets and Recovery Efforts
The liquidator is expected to sell the company’s assets, primarily consisting of:
- Motor vehicles
- Construction equipment
These assets may provide some funds for creditors. However, the report warns that there might be insufficient assets to cover all outstanding debts. It looks increasingly unlikely that unsecured creditors will receive any payments.
Prioritization of Creditors
In the distribution of recovered funds, secured creditors will take precedence. This group includes major suppliers such as Kiwibank Ltd and Carters Building Pro. Unsecured creditors, who include various suppliers and contractors like ACC and McAlpines Mitre 10 Mega, are estimated to be owed significant amounts.
Investigation into Directors’ Conduct
The liquidator’s report also raises questions about the actions of the company’s directors, Daniel Broom and Robert Stanton. The investigation will determine if they adhered to the responsibilities outlined in the Companies Act 1993, which mandates that directors must avoid actions that could pose a risk to creditors. Should the investigation reveal any breaches, the liquidator may seek to hold the directors personally accountable for the company’s debts.
Efforts During Liquidation
Despite the turmoil, one of the directors took steps to finish as many ongoing projects as possible before terminating operations. The liquidator confirmed that these actions were responsible but still underscored the need to comply with legal regulations throughout the process.
Claim Submission for Creditors
Creditors are urged to act quickly, with a submission deadline set for November 7, 2024, to ensure their claims are considered in the liquidation proceedings.
Construction Sector Challenges
This liquidation highlights a broader issue within the construction industry. According to statistics, one in four overall liquidations in New Zealand over the past 12 months involved construction companies.
The decline in projects has put immense pressure on firms like Devon Construction. With less work available, many companies find it difficult to maintain financial stability.
Conclusion
As the liquidation of Devon Construction unfolds, affected creditors face an uncertain future. The financial turmoil reflects the struggles facing the construction industry in Canterbury, a sector that is grappling with ongoing challenges. With investigations into the conduct of the company’s directors underway, stakeholders remain hopeful for some resolution, while the future of many unsecured creditors hangs in the balance
